• Attention of the trade is invited to Board's Circular No. 54/99 - Cus issued under F. No. 605/195/97-DBK dated 25.10.2001 wherein it was clarified that DGFT Policy Circular No. 67(RE-98)/98-99 dated 19.2.99 on the above subject should be ignored for the purpose of granting DEPB benefits to made-ups made out of yarn dyed fabrics falling under DEPB entry Sr. Nos. 69 and 72 Product Group - Textiles.

• The issue has been re-examined in the Board and it is felt that DGFT's said Policy Circular to treat made-ups made out of yarn dyed fabrics as processed items is correct

• DOR Circular No. 54/99 - Cus dated 25.8.99 may, therefore, be treated as withdrawn

• Attention of the Trade & Public and all concerned , is invited to the Ministry's letter F. No. 341/143/2001 - TRU dt. 18/10/01. The contents of the same are reproduced below: -

• "The doubts have been raised as to whether the "value of taxable service" in respect of broadcasting services will include the commission paid by the broadcasting agency or not. The facts of the case are as follows": -
  In the invoices raised by the broadcasting agency on the advertising agency, the gross amount for the broadcasting services is indicated. From this amount, the commission or discount (usually 15% of the gross amount ) given to the advertising agency is deducted and the net amount is payable by the advertising agency to the broadcasting agency is indicated. Thus what is "received by the broadcasting agency" for the service rendered is the net amount excluding the commission or discount. In some cases, only the net amount is invoiced to the advertising agency.

• The matter has been examined by the Board. The value of taxable
  service is the amount received by the broadcaster for the providing the broadcasting service. Therefore, service tax is leviable only on the amount received by the broadcaster is net of the commission or discount paid to the advertising agency, service tax will be payable on this amount. However, such abatement towards commission/discount shall be allowed only when the same is clearly indicated in the invoice/bill raised by the broadcasting agency on the advertising agency. It will be relevant to mention here that on the commission/discount received by the advertising agency, service tax is separately leviable under the category of advertising services. In this regard, your attention is invited to Board's circular F. No. 341/43/96-TRU dt. 31.10.96 wherein it was clarified that the commission received by the advertising agency for getting the advertisement published in the print media (i.e. newspaper, periodicals etc.) or the electronic media (Doordarshan, private channels, AIR etc.) will be includible in the value of taxable service under the category of "advertising service".

Problems faced by Merchant Exporters regarding availment of drawback on garments - regarding
Attention of the trade is invited to Board's Circular No. 54/2001 - Customs issued under F. No. 609/107/2001 dated 19.10.2001.

• It has been clarified that all categories of Ready made woven garments (other than raincoats, undergarments and clothing accessories) falling under chapter 62 of Customs & Central Excise Tariff Act are now subject to Central Excise levy as a result of the changes announced in the Union Budget, 2001-2001 (Finance Bill was enacted). Though normally it is the actual manufacturer who is to pay duty of excise leviable on any commodity, considering the peculiar and decentralised nature of garment producing sector, certain special provisions have been made, wherein the mechants who get their garments produced by supplying materials to job working units have been recognised for registration / duty payment etc. purposes. Vide Rule 4(3) of Central Excise (No.2) Rules, 2001, a merchant manufacturer i.e., a merchant, who gets the goods manufactured from a job worker on his own account, is required to pay duty on the garments manufactured on his behalf on job work basis, either himself or he may authorise such job worker(s) to pay duty on his behalf. When merchant manufacturer pays duty, he is also entitled to avail of CENVAT for duty paid inputs procured and used for garment production by job workers.

• Since the manufacturer or merchant manufacturer whose domestic turn over exceeds rupees one crore has to pay excise duty and can avail of CENVAT credit in respect of inputs used in the manufacture of woven garments, separate drawback rates have been provided with effect from 7.6.2001 for the garments where cenvat facility is availed, the drawback rate has only Customs & Central Excise allocations. It has been brought to the notice of the Board that the Customs formations while scrutinising Drawback claims of woven garment exporters are insisting on the production of the certificate evidencing non-availment of Cenvat facility in every case. This is stated to be causing undue hardship to garment exporters- very large number of which are said to be only merchant-manufacturers who are baically export oriented and whose domestic clearances are nil or negligible.

• Export Organisations have, however, represented that in the present scenario where a merchant getting the goods manufactured from other manufacturers/job workers is under liability to pay the Central Excise duty and especially since such manufacturers/job workers are scattered, it is possible to furnish such certificate in every case. Further, it has also been represented that most of garment exporters are merchant-manufacturers who are exempted from the levy of Central Excise as their domestic clearances do not exceed Rs. 1 Crore. They have, therefore, requested that instead of insisting on a Cenvat non-availment certificate in every case, drawback at higher rate may be permitted on the basis of suitable declaration from such exporters. The Department could check independently if need be to check its veracity.

• The issue and request has been examined and the production and export pattern and system of excise control and duty payment / CENVAT in garment industry also looked into. It is observed that in the case of the goods manufactured by manufacturer-exporters, there shall not be any difficulty in verifying the declaration that Cenvat facility has not been availed in as much as for dutiable garments, if cleared for export under bond/rebate claim, movement has to be made under ARE - 1 and as such exporters can evidence the same through production of an ARE-1 issued.

• For the exports, where ARE-1 is not issued, it has been decided that they should clearly declare on the Shipping Bills, the name(s) of the job workers/ supporting manufacturing unit(s) through whom the garments covered by the Shipping Bill have been have been manufactured. These exporters shall also be required to give a declaration in the format given in the Annexure-I (available at our office) certifying interalia that they are not registered with the Central Excise and that they are not paying any Central Excise duties and not availing of Cenvat facility and they have not authorised any supporting manufacturer/job worker to pay excise duty and comply with provisions of Central Excise (No. 2) Rules, 2001.

• These exporters shall also be required to furnish a certificate-cum-declaration as given in Annexure - II (available at our office), from their supporting manufacturers/job workers interalia clarifying that they are manufacturing and supplying garments to this particular merchant exporter only and that they are not registered nor availing of any Cenvat facility for any garments manufactured by them.

• Such merchant-manufacturer exporters can be allowed higher drawback on the basis of these declarations.

• The Customs Houses shall get the veracity of the declaration given by the exporters and their supporting manufacturers / job workers, verified at random by the Jurisdictional Deputy / Assistant Commissioner of Central Central Excise on quarterly. The criteria for random selection of such declarations to be verified by the Excise authorities, may be formulated by the Commissioner of Customs. If on verification any misdeclaration is discovered, the higher drawback granted by the Customs would be recovered and only lower benefits admitted for future shipments to such exporters.
  

• Realisation of the amount paid under provisions of the erstwhile sub-rule (1) of rule 57CC and its retention by the manufacturers - whether the provisions of section 11D of Central Excise Act. 1944 would get attracted in such cases - reg.

• Attention of the trade is invited to Ministry's Circular No. 599/36/2001-CX 8 dated 12.11.2001

• The erstwhile rule 57CC(1) of the Central Excise Rules,1944 provided for the payment of an amount equal to 8% of the total price (excluding sales tax etc. paid on such goods) of the exempted final product by the manufacturers who manufacture both dutiable and exempted final products without maintaining a separate account for inputs, on which credit has been availed. It has been reported that certain manufacturers are realising the amount so paid under Rule 57CC from their buyers by showing it separately in the invoices. Doubts have been expressed as to whether the amount so realised by the manufacturers represents Central Excise duty and whether the amount has to be paid to the credit of Central Government under the provisions of section 11D of Central Excise Act, 1944.

• The matter has been examined by the Board and it is clarified as under:
  (a) Rule 57CC does not envisage that the amount would be separately realised from the buyer since it is to be calculated on the total price charged to the buyer.
  (b) When the 8% amount is shown separately on invoice as an amount (not as excise duty) Section 11D would not get attracted. In that case the amount of 8% would have to be calculated on the total price charged from the buyer.
  (c) In case the amount of 8% or for that matter any amount representing an excise duty is recovered from the buyer Section 11D gets attracted. This is a matter of fact to be ascertained on the basis of documents.

• G.S.R. (E)- Whereas the Central Government is satisfied that the duty of excise (called the Central Value Added Tax (Cenvat) leviable on high speed diesal and the special duty of excise on motor spirit (commonly known as petrol), falling under heading No. 27.10 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) should be increased and that circumstances exist which render it necessary to take immediate action;

• Now, therefore, in exercise of the powers conferred by clause (b) of sub-section (1) of section 3 of the said Central Excise Tariff (Amendment) Ordinance, 2002 (1 of 2002), the Central Government, hereby directs that the First Schedule and the Second Schedule of the said Central Excise Tariff Act shall be amended in the following manner, namely:-

• (i) in the First Schedule to the said Central Excise Tariff Act, in Section V, Chapter 27, against sub-heading No. 2710.90 occurring in column (4), the entry "20%" shall be substituted;
  (ii) in the Second Schedule to the said Central Excise Tariff Act, against sub-heading No. 2710.19 occurring in column (2), for the entry "74%" shall be substituted.

• This notification shall come into force on the 12th day of January, 2002 and shall cease to have effect on the 1st day of April, 2002.

• We reproduce below for information and guidance of the members A.P. (DIR Series) Circular No. 15 dated 8th December, 2001 issued by the Reserve Bank of India, Mumbai on the above subject:

• "Export Import Bank of India (Exim Bank) has concluded an agreement with the Corporacion Andina De Fomento (CAF) on July 19, 2001 making available to the latter a line of Credit upto an aggregate sum of US$ 10 million (U.S. Dollar Ten million only). The credit has become effective from August 27, 2001, and is available for financing Indian export of eligible goods (Textile Machinery is one of them) and related services to buyers in the borrowing countries, viz., Republics of Bolivia, Colombia, Ecudor, Peru and Venezuela.
  The eligible goods will also include initial spares, drawings and designs together with services related thereto. The export of goods from India and their import into the borrowers' countries shall be subject to the laws and regulations in force in the concerned countries.

• The broad terms and conditions of the credit are as under:
  (a) Every contract under the credit will require prior approval of Exim Bank.
  (b) The credit shall be available for financing an amount upto 90 per cent of the F.O.B. (Free on Board) or C. & F (Cost & Freight) or C.I.F. (Cost, Insurance & Freight) contract price of the eligible contract.
  (c) The contract price shall be specified in U.S. Dollar and shall not be less than U.S. Dollar 1,000,000/- (U.S. Dollar One Million only) or such amount as may, from time to time, be agreed upon between Exim Bank and the borrower.
  (d) The contract signed under the credit should also provide for the following :-
  (i) The buyer shall make an advance payment of 10 per cent of the F.O.B./C&F/C.I.F. of the contract value to the seller within 10 business days after the date of approval of the contract by Exim Bank.
  (ii) The buyer shall make payment to the seller of the balance 90 per cent of F.O.B./C&F/C.I.F. of the contract price, pro-rata against shipments, to be covered under an irrevocable letter of credit in favour of the seller.
  (iii) The eligible goods shall be inspected before shipment on behalf of the buyer and the documents to be furnished by the seller to the negotiating bank under the letter of credit arrangement shall include an inspection certificate

• The letter of credit shall be advised through such offices of the negotiating bank in India as may be designated from time to time by Exim Bank in consultation with CAF. The letter of credits (1994 edition) published by the International Chamber of Commerce (Publication No. 500) and shall be irrevocable and if required by a seller, be also divisible and transferable

• Upon presentation of documents by the beneficiary to the negotiating bank, the negotiating bank shall pay to the beneficiary an amount being not more than 90 per cent of F.O.B./C&F/C.I.F. contract value, apportionable to the relevant letter of credit

• Where negotiation has been effected without reserve, Exim Bank shall upon receipt of the negotiating bank's written communication, reimburse the negotiating bank in U.S. Dollar with the amount of the eligible value to the extent apportionable to the relative shipment by transfer to the credit of the negotiating bank in such account with such bank in New York, USA, as may be specified by the negotiating bank in the communication to Exim Bank. If the negotiation has been made under reserve, Exim Bank shall make payment to the negotiating only after Exim Bank receives a written communication from the negotiating bank which has opened/issued letters of credit, has lifted the reserve and has accepted the documents, or a communication from the issuing bank through the borrower or the negotiating bank to that effect

• Exim Bank shall in no way be liable or responsible for any act or omission of the negotiating bank in handling the letter(s) of credit or negotiation of documents thereunder

• Bank charges, expenses, commission or stamp duty payable in India shall be to the account of the seller/beneficiary and those payable in the borrower's countries shall be to the account of the buyer.

• The terminal dates for opening letters of credit and utilistaion of credit are August 26, 2002, and February 26, 2003 respectively.

• Shipments under the credit will have to be declared on GR/SDF Forms as usual. All copies of GR/SDF Forms should bear a prominent superscription reading 'Export under Exim Bank line of credit dated July 19, 2001, extended to Corporacion Andina De Fomento (CAF) (Andean Development Corporation)'. The number and date of this circular should be recorded in the space provided for. On receipt of full payment of the bills in the manner stated above, authorised dealer should certify the duplicate copy/ies of the relative GR/SDF Form/s and forward them to the concerned Regional Office of the Reserve Bank, in the usual manner

• No agency commission shall be payable in respect of exports financed under the above line of credit. However, Reserve Bank may consider on merit, requests for payment of commission upto a maximum extent of 5 per cent of the F.O.B./C&F/C.I.F. value in respect of goods(specified in the Annexure not enclosed but Textile is mentioned). In such cases, Colombia, Ecuador, Peru and Venezuela only by deduction from the invoice of the relevant shipment and the reimbursable amount by the Exim Bank to the negotiating bank will be 90 per cent of the F.O.B./C&F/C.I.F. value minus the commission paid. Approval for payment of commission should be obtained before the relevant shipment is effected

• The directions contained in this circular have been issued under Section 10(4) and Section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999).

We reproduce below fore information and guidance of the members Circular No. 5 (2001-2002 Series) dated 2nd January, 2002 issued by the Office of Textile Commissioner, Mumbai on the above subject.

"Providing an option to the Small Scale Textile and Jute Industry:

Ministry of Textiles, vide its letter No. 28/21/2001-CT-1 dated 27th December, 2001 has informed that Government has now decided to provide, with immediate effect, an option to the Small Scale Textile and Jute Industries to avail of either upfront Credit Linked Capital Subsidy or the existing 5% interest reimbursement under the Technology Upgradation Fund Scheme (TUFS)".

• We reproduce below for information and guidance of the members Circular No. 68/45/2001-CX(F.No. 209/34/2001-CX.6) dated 24th December, 2001 issued by the Ministry of Finance (Department of Revenue), Central Board of Excise & Customs, New Delhi on the above subject:

• "I am directed to refer to the New Central Excise Manual released on 1.9.2001 and Board's Circular No. 586/23/2001-CX dated 12.9.2001 wherein it is directed that Merchant Exporters, other than the Status holders (Super Star Trading House, Star Trading House, Trading House and Export House), have to, along with the bond executed for the purposes of exports as the cost of compliance has increased

• The matter has been examined by the Board and in the interest of facilitating exports it has been decided to keep the instruction regarding the furnishing of 25% security in abeyance till further order in respect of Merchant Exporters who are registered with a Recognised Export Promotion Council. Accordingly, it is directed that 25% security may not be insisted upon from said Merchant Exporters who are with a Registered Export Promotion Council.